Biswabrata Maity, Hooghly V. CIT, -XX, KOLKATA, Kolkata

ITA 1188/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4678 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANANDA SRIVASTVA
• Keywords: Bogus purchase; Unexplained investment; Unexplained expenditure; Business income; Revision of order
• Section: 69C; 143(3); 69; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.1188/KOL/2014 ASSESSMENT YEARS:2009-10 BISWABRATA MAITY 100/60, G.T. ROAD, RISHRA, DIST. HOOGHLY, PIN-712248 [ PAN NO. AKJPM 1320 M ] / V/S . CIT, KOLKATA-XX 54/1, RAFI AHMED KIDWAI ROAD, 1 ST , FLOOR, KOLKATA-700 016 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SOMNATH GHOSH, ADVOCATE /BY RESPONDENT SHRI SACHCHIDANANDA SRIVASTVA, CIT-DR /DATE OF HEARING 16-06-2016 /DATE OF PRONOUNCEMENT 10-08-2016 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL HAS BEEN FILED BY THE ASSESSEE RELATING TO ASSESSMENT YEAR (AY) 2009-10. THE APPEAL IS AGAINST THE ORDER PASSED BY COMMISSIONER OF INCOME TAX - XX, KOLKATA VIDE NO. CIT-XX/KOL/REV U/S 263/2013-14 /5120-5123 DATED 21.02.2014 U/S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER RE FERRED TO AS THE ACT). ASSESSMENT WAS FRAMED BY ITO WARD-1(3), HOOGHLY U/S 143(3) VID E HIS ORDER DATED 20.05.2011. 2. THE ASSESSEE HAS FILED MODIFIED GROUNDS OF APPEA L. LD. COUNSEL FOR ASSESSEE SUBMITS THAT THE GROUNDS ARE BEING MODIFIED FOR COR RECTING THE ERRORS WHICH HAD CREPT IN THE ORIGINAL GROUND OF APPEAL INASMUCH MODIFIED GROUNDS OF APPEAL ARE HEREBY ADMITTED FOR THE SAKE OF CONVENIENCE, SAME ARE REPR ODUCED HEREUNDER:- 1. FOR THAT NONE OF THE CONDITIONS PRECEDENT EXISTE D AND/OR HAVE BEEN COMPLIED WITH AND/OR FULFILLED IN THE INSTANT CASE BY THE LD . COMMISSIONER OF INCOME TAX, ITA NO.1188/KOL/2014 A.Y.2009-10 BISWABRTA MAITY V. CIT-XX, KOL PAGE 2 KOLKATA-XX, KOLKATA FOR HIS ALLEGED ASSUMPTION OF J URISDICTION U/S. 263(1) OF THE INCOME TAX ACT, 1961 AND THE SPECIOUS ORDER FRAMED U/S. 263 OF THE ACT IN PURSUANCE TO THE IMPUGNED NOTICE DATED 05-07-2012 ISSUED THER EUNDER IS THEREFORE AUTHORITIES BELOW INITIO VOID, ULTRA VIRES AND EX FACIE NULL IN LAW. 2. FOR THAT THE LD. COMMISSIONER OF INCOME TAX, KOL KATA-XX, KOLKATA ACTED UNLAWFULLY IN CONCEIVING THAT THE PURPORTED ADDITIO N IN THE AMOUNT OF RS.1,57,318/- RESTORED TO BY THE LD. INCOME TAX OFFICER, WARD 1(3 ),HOOGHLY ON ACCOUNT OF UNACCOUNTED PURCHASE WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OR REVENUE WITHOUT ANY APPLICATION OF MIND ON THE MATT ER AND THE PURPORTED FINDING ON THAT ISSUE IS WHOLLY ARBITRARY, UNWARRANTED AND PER VERSE. 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE INSTANT CASE, THE LD. COMMISSIONER OF INCOME TAX KOLKATA-XX, KOLKATA WAS REMISS IN MISCONCEIVING THE APPLICATION OF S. 69C OF THE INCOME TAX ACT, 1961 O N THE UNACCOUNTED PURCHASE OF RS.1,73,28,135/- IN ITS ENTIRETY AND THE SPECIOUS D IRECTION GIVEN ON THAT BEHALF INDULGING IN SURMISE, SUSPICION AND CONJECTURE IS T OTALLY ILLEGAL, ILLEGITIMATE AND INFORM IN LAW. SHRI SOMNATH GHOSH, LD. AUTHORIZED REPRESENTATIVE A PPEARED ON BEHALF OF ASSESSEE AND SHRI SACHCHIDANANDA SRIVASTAVA, LD. DEPARTMENTA L REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 3. ONLY INTER-CONNECTED SOLE ISSUE RAISED BY ASSESS EE ARE THAT LD. CIT ERRED IN CONSIDERING THE ORDER OF ASSESSING OFFICER AS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 4. FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL AND ENGAGED IN WHOLESALE TRADING OF EGGS UNDER THE NAME AND STY LE OF MA KALI ENTERPRISE . IN THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSEE HAS FILED H IS RETURN INCOME ON 25.06.2009 DECLARING TOTAL INCOME OF 2,55,500/-. THEREAFTER CASE WAS SELECTED UNDER SCRU TINY UNDER CASS MODULE AND ACCORDINGLY NOTICE WAS ISSUED U/S. 143(2) OF THE ACT AND ASSESSMENT WAS FRAMED BY ASSESSING OFFICER AFTER DI SALLOWING 1% OF THE PURCHASE AMOUNT. HOWEVER, LD. CIT FOUND THE ORDER OF AO AS E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF FOLLOWING;- A) ASSESSEE, DURING THE COURSE OF ASSESSMENT HAS SU BMITTED STATEMENT OF TOTAL PURCHASE WITH SUPPLIER-WISE BREAK-UP AND ACCORDINGL Y PURCHASE FIGURE WAS ITA NO.1188/KOL/2014 A.Y.2009-10 BISWABRTA MAITY V. CIT-XX, KOL PAGE 3 ARRIVED AT 5,94,11,150/-. HOWEVER ASSESSEE IN HIS TRADING ACCO UNT HAS SHOWN PURCHASE FOR RS.4,20,83,015/-. B) SO THERE WAS A DIFFERENCE OF AMOUNT OF 1,73,28,135- OF THE EXCESS PURCHASE WHICH WERE NOT SHOWN TO DEPARTMENT. ACCORDINGLY, AO APPLIED 1% TO THIS DIFFERENCE AMOUN T OF PURCHASE VALUE TO ARIVE AT THE UNDISCLOSED PROFIT MADE OUT OF THE UNDISCLOSED PURCHASES. HOWEVER, LD. CIT U/S 263 TREATED THE ENTIRE AMOUNT OF DIFFERENCE OF PURC HASES AS UNEXPLAINED INVESTMENT WITHIN THE MEANING OF SEC. 69 OF THE ACT. LD. CIT A CCORDINGLY ISSUED NOTICE TO ASSESSEE FOR SEEKING THE EXPLANATION IN THIS REGARD . IN COMPLIANCE TO THE NOTICE, ASSESSEE SUBMITTED THAT THE DIFFERENCE IN THE AMOUN T OF PURCHASE IS ARISING DUE TO UNINTENTIONAL ERROR I.E IT WAS OMITTED TO MENTION I N INCOME TAX RETURN AS THE BANK STATEMENT OF MARCH QUARTER OF THE RELEVANT FINANCIA L YEAR CAME LATE. HOWEVER, LD. CIT DISREGARDED THE PLEA OF ASSESSEE THAT ASSESSEES BO OKS OF ACCOUNT WAS DULY AUDITED ON THE BASIS OF DOCUMENT PRODUCED BEFORE CHARTERED ACC OUNTANT. THE ASSESSEE SUBMITTED THAT PURCHASE FIGURE WAS RECORDED ON THE BASIS OF L EDGER AND PURCHASE REGISTER AND NOT ON THE BASIS OF BANK STATEMENT. THE LD. CIT U/S. 26 3 ALSO ASKED THE ASSESSEE TO PRODUCE HIS BOOKS OF ACCOUNT ALONGWITH OTHER RELEVA NT DOCUMENTARY EVIDENCE BUT ASSESSEE FAILED TO PRODUCE THE SAME. IN VIEW OF ABO VE FINDINGS, LD. CIT U/S. 263 OF THE ACT HELD THAT THE ORDER PASSED BY AO IS ERRONEOUS A ND PREJUDICIAL TO THE INTEREST OF REVENUE AND ACCORDINGLY HE DIRECTED THE AO TO ADD B ACK THE DIFFERENCE IN PURCHASE AMOUNT OF 1,73,28,135/- U/S 69C OF THE ACT TO THE TOTAL INCOM E OF ASSESSEE. BEING AGGRIEVED BY THIS ORDER OF LD. CIT ASSESSEE C AME IN APPEAL BEFORE US. 5. BEFORE US LD. AR FILED PAPER BOOK WHICH IS RUNNI NG FROM PAGES 1 TO 106 AND SUBMITTED THAT IT IS NOT IN DISPUTE THAT THE LD. CI T INITIATED THE PROCEEDING U/S.263(1) OF THE INCOME TAX ACT, 1961 ON THE ONLY ISSUE OF AP PLYING THE PROVISIONS OF S. 69C OF THE ACT TO THE UNACCOUNTED PURCHASES FOUND IN THE C OURSE OF ASSESSMENT PROCEEDINGS BY THE ASSESSING OFFICER WHEREIN HE HAD APPLIED THE NET PROFIT RATE ON SUCH UNACCOUNTED PURCHASES WHICH ACCORDING TO THE LD. CO MMISSIONER HAD RENDERED THE ASSESSMENT ERRONEOUS IN SO FAR AS IT WAS PREJUDICIA L TO THE INTEREST OF REVENUE. ITA NO.1188/KOL/2014 A.Y.2009-10 BISWABRTA MAITY V. CIT-XX, KOL PAGE 4 ACCORDING TO THE COMMISSIONER THE ASSESSING OFFICER SHOULD HAVE APPLIED THE PROVISIONS OF S. 69C OF THE ACT ON THE UNACCOUNTED PURCHASES. THE IMPUGNED INVOCATION OF THE PROVISIONS OF S. 69C OF THE ACT I S CONDITIONED WITH THE PRECEDENT THAT WHERE AN EXPENDITURE IS FOUND TO HAVE BEEN INCURRED BY AN ASSESSEE IN THE FINANCIAL YEAR AND THE ASSESSEE FAILS TO EXPLAIN THE SOURCE O F SUCH EXPENDITURE OR ANY PART THEREOF, TO THE SATISFACTION OF THE REVENUE ONLY, T HEN THE QUESTION OF THE ADDITION OF THE ENTIRE DIFFERENCE AMOUNT CAN AT ALL BE CONSIDERED. IN THE INSTANT CASE HOWEVER, THE PROVISION OF S, 69C OF THE ACT IS FAR FROM APPLICAB LE. THE PAYMENTS MADE ON ACCOUNT OF PURCHASES PASSED THROUGH THE CORRIDORS OF THE BA NKING CHANNEL. THE DEPOSITS MADE IN THE BANK ACCOUNT ARE ON ACCOUNT OF SALE PROCEEDS AND THE PAYMENTS MADE ARE ON ACCOUNT OF DISCHARGE OF SUNDRY CREDITORS. THE NATUR E AND SOURCE OF THE PAYMENTS ARE EXPLAINED BY THE APPELLANT WITH THE NAMES AND ADDRE SSES OF THE PARTIES FROM WHOM PURCHASES WERE MADE BY HIM. THE PAYMENTS WERE MADE TO THOSE PARTIES WHICH ARE CLEARLY DEPICTED IN THE BANK STATEMENTS. THEREFORE THE ENTIRE CONSPECTUS FOR APPLICATION OF S. 69C OF THE ACT FAILS. IT IS SETTLED THAT IF F ROM THE DOCUMENTS IT APPEARS THAT THERE WAS EXPENDITURE THEN UNLESS ITS SOURCE IS SATISFACT ORILY EXPLAINED IT COULD BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR THE FINANCIAL YEAR. THE QUESTION OF ADDITION DEPENDS ON THE SATISFACTORY EXPLANATION OF THE SOUR CE. IT CANNOT BE NEGATED SIMPLY BECAUSE THE EXPENDITURE WAS ACTUALLY INCURRED. ONLY ON THE FAILURE TO EXPLAIN THE SOURCE OF EXPENDITURE IT IS LIABLE TO BE ADDED U/S. 69C OF THE ACT [CIT. -VS- BHAGWATI DEVELOPERS (P.) LTD (2003) 261 ITR 658 (CAL). IN AB SENCE OF ANY COMPLIANCE WITH THE REQUIREMENTS OF THE STATUTE, THE MISCHIEF OF SU CH ENACTMENT WILL NOT BE ATTRACTED. IN FACT, EVEN THOUGH THERE IS A PROVISION U/S. 69C OF THE ACT IN THE STATUTE BOOK FOR CONCEIVING ADDITION OF UNEXPLAINED EXPENDITURE INCU RRED, HOWEVER, THERE IS NO LEAVE OR LICENCE GRANTED FOR CONCEIVING AN ADDITION ON AC COUNT OF AN EXPENDITURE WHEREIN THE NATURE AND SOURCE OF WHICH WERE EXPLICITLY EXPL AINED. SINCE THE ASSESSING OFFICER FOUND THAT THE EXPENDITURE INCURRED BY THE APPELLAN T WERE DULY IDENTIFIABLE, HE OPTED TO RESORT TO THE PROVISIONS OF SECTION 69 OF THE ACT B Y ESTIMATING THE NET PROFIT FROM THE UNACCOUNTED PURCHASES. AS THE AO HAD SPECIFICALLY E XAMINED THE MATTER IN THE PROPER PERSPECTIVE AFTER DUE APPLICATION OF MIND, THE ASSU MPTION OF JURISDICTION U/S. 263(1) OF THE ACT BY THE LD. CIT RESTED ON A WRONG PREMISES I N ORDER TO SET ASIDE THE ASSESSMENT ITA NO.1188/KOL/2014 A.Y.2009-10 BISWABRTA MAITY V. CIT-XX, KOL PAGE 5 ORDER PASSED U/S. 143(3) OF THE ACT AS BEING ERRONE OUS IN SO FAR AS IT WAS DEEMED TO BE PREJUDICIAL TO THE INTEREST OF REVENUE RESULTED IN MISCONSTRUCTION OF THE PROVISION WHICH IS NOT IN CONSONANCE WITH THE LEGAL POSITION IN THIS RESPECT. THE LD. CIT BASED ON HIS FINDINGS ON THE ISSUE THAT THE AO HAS ERRONE OUSLY ACCEPTED THE APPLICATION OF EXTRACTING THE NET PROFIT ON THE UNACCOUNTED PURCHA SES FOUND IN COURSE OF ASSESSMENT PROCEEDINGS. IT IS FURTHER NOT IN DISPUTE THAT THE AO FOUND THAT THE DIFFERENCE OF PURCHASES AT RS. 4,20,83,015/- AS REPORTED BY THE A PPELLANT VIS-A-VIS THE 6,30,06,706/- FOUND BY HIM ON PERUSAL OF THE BANK STATEMENT. ON S UCH ADMITTED FACTS HE CONCLUDED THAT SINCE BOTH PURCHASE AND SALE ARE BOTH MADE OUT OF BOOKS, HE TOOK THE ONLY POSSIBLE VIEW THAT NET PROFIT REALISED ON SUCH PURC HASE CAN COME INTO RECKONING FOR DETERMINATION OF UNDISCLOSED INCOME. THERE IS NO DI SPUTE THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF WHOLESALE DEALING OF EGGS AND TH E ADMITTED NET PROFIT IN SUCH BUSINESS IS 1% OF THE TOTAL TURNOVER. THE AO THUS A PPLIED 1% ON SUCH UNDISCLOSED PURCHASES AND CAME TO THE CONCLUSION THAT AN AMOUNT OF 1,73,281/- WAS THE NET PROFIT ON THE UNDISCLOSED TRADING ACTIVITY. THERE IS NO DI SPUTE THAT SUCH PAYMENTS ON ACCOUNT OF PURCHASES WERE MADE IN THE ACTUAL COURSE OF THE BUSINESS OF THE APPELLANT AND IS THEREFORE INEXTRICABLY LINKED TO HIS BUSINESS OPERA TIONS. THE APPROACH OF THE AO THEREFORE DOES NOT LEAVE AN IOTA OF DOUBT THAT PURC HASES OF EGGS MADE TO THE EXTENT OF 1,73,28,135/- WAS NOT DISCLOSED BY THE APPELLANT, H E RIGHTFULLY CONCLUDED THAT THE NET PROFIT ELEMENT EMBEDDED IN THE CORRESPONDING SALES WHICH CAN BE THE ONLY COMPELLING JUSTIFIABLE CONCLUSION FROM THE ANALYSIS OF THE PEC ULIAR FACTS AND CIRCUMSTANCES IN THE INSTANT CASE. IT IS NOT IN DISPUTE THAT THE PURCHAS ES AGGREGATING TO 1,73,28,135/- ARE NOT REPORTED IN THE BOOKS AND ACCORDINGLY, NOT DISC LOSED IN THE RETURN FILED BY THE APPELLANT. HOWEVER, SUCH PURCHASES CANNOT BE SUBJEC TED TO ADDITION IN THEIR ENTIRETY. IT IS AN ACCEPTED POSITION THAT ANY SALE PROCEEDS RECE IVED FROM SUCH ACTIVITY IS AVAILABLE WITH THE APPELLANT FOR SUBSEQUENT PAYMENTS ON ACCOU NT OF PURCHASES AND, THEREFORE, FOR ANY SALE PROCEEDS RECEIVED FROM SUCH UNDISCLOSED AC TIVITY CORRESPONDING PROFIT IS TO BE ESTIMATED THEREON FROM SUCH TRANSACTIONS. THEREF ORE, THE NET PROFIT FROM SUCH OPERATION IS TO BE ESTIMATED FOR THE PURPOSE OF FIN DING OUT THE INCOME FROM SUCH ACTIVITY. THE NET PROFIT OF THE APPELLANT DISCLOSED IN THE ASSESSMENT YEAR UNDER DISPUTE IS 1% WHICH HAS BEEN ACCEPTED AND APPLIED BY THE AO . UNDER SUCH CIRCUMSTANCES, THE ITA NO.1188/KOL/2014 A.Y.2009-10 BISWABRTA MAITY V. CIT-XX, KOL PAGE 6 AO TOOK THE CORRECT APPROACH BY APPLYING THE SAME N ET PROFIT RATE ON SUCH PURCHASES. WHERE IT IS FOUND THAT EVEN THOUGH THE PURCHASES AR E BOGUS, THE ENTIRE PURCHASES CANNOT BE ADDED BECAUSE CORRESPONDING SALES IS ALSO THERE ONLY NET PROFIT RATE CAN BE APPLIED [ SEEMA CHATTERJEE -VS- ITO . (I.T.A NO. 2174/KOL/2010 DATED 17-07-2014)]. WHERE THE AO HAS ALREADY TAXED THE PROFIT ON SUCH U NDISCLOSED PURCHASES AND CONSIDERING THE FACT THAT THE REVENUE HAS NOT BROUG HT ON RECORD THAT INVESTMENT REMAINED IN PURCHASES OR THE ADDITIONAL INVESTMENT IS REQUIRED OVER AND ABOVE THE CAPITAL EMPLOYED BY THE ASSESSEE FOR SUCH UNACCOUNT ED PURCHASE THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) IS NOT JUSTI FIED AND ACCORDINGLY THE SAME IS DIRECTED TO BE DELETED [THE VARIETY STORES - VS- IT O. ( ITA NO. 2635/KOL/2005 DATED 26-05-2006). THUS, THE AMOUNT OF RS. 1.73.281 /- WAS CORRECTLY DETERMINED BY THE AO AND ADDED TO THE TOTAL INCOME OF THE ASSESSE E TOWARDS THE PROFIT ELEMENT EMBEDDED IN THE ALLEGED UNDISCLOSED PURCHASE THROUG H CORRESPONDING SALE. IT IS SETTLED THAT THE ENTIRE AMOUNT INVESTED FOR THE RAW MATERIA LS COULD NOT BE ADDED AS INCOME INASMUCH AS FOR THE PURPOSE OF EARNING THIS INCOME THE ASSESSEE HAD MADE CERTAIN EXPENDITURE CIT VS. S.M. OMER (1993) 201 ITR 608(CAL), WHERE THE ASSESSING OFFIC ER MADE ADDITION TOWARDS PROFIT OF ASSESSEE ON ACCOUN T OF CREDIT SALES MADE BY HIM OUTSIDE ACCOUNT BOOKS, IT WAS HELD THAT TOTAL SALES COULD NOT BE REGARDED AS PROFIT OF ASSESSEE AND NET PROFIT RATE HAD TO BE ADOPTED ON T HOSE SALES AS AN IMMUTABLE PROPOSITION WHILE MAKING ADDITION [ CIT VS- BALCHAND AJIT KUMAR (2003) 263 ITR 610 (MP)]. THUS, THE AO TOOK THE MOST REASONABLE AND PO SSIBLE VIEW THAT INCOME FROM UNDISCLOSED TRADING ACTIVITY IS TO BE CONFINED TO T HE NET PROFIT EARNED IN SUCH ACTIVITY. IT IS PRECISELY SETTLED IN THIS RESPECT THAT AN ORD ER OF ASSESSMENT PASSED BY AN ITO. THEREFORE, SHOULD NOT BE INTERFERED WITH ONLY BECAU SE ANOTHER VIEW IS POSSIBLE [ CIT - VS- GREENWORLD CORPORATION (2009) 314 ITR 81 (SC)]. IT IS SETTLED THAT IF THE ASSESSING OFFICER ADOPTS ONE OF THE POSSIBLE COURSE S AVAILABLE IN THE SCHEME OF INCOME TAX WHICH RESULTS IN ANY LOSS OF REVENUE OR WHEN TWO VIEWS ARE POSSIBLE AND THE AO ADOPTED ONE OF THE AFORESAID RE COURSES AVAI LABLE IN LAW WITH WHICH THE LD. CIT DOES NOT AGREE. IT WOULD NOT BE AN ORDER PREJUD ICIAL TO THE INTEREST OF REVENUE FOR INVOKING JURISDICTION U/S 263 OF THE ACT. IN SUCH C ASE, THE PROVISION OF S. 263 OF THE ACT WOULD BE INAPPLICABLE UNLESS IT IS SPECIFICALLY FOUND THAT THE COURSE FOLLOWED BY ITA NO.1188/KOL/2014 A.Y.2009-10 BISWABRTA MAITY V. CIT-XX, KOL PAGE 7 THE AO IS ULTRA VIRES THE SCOPE ON THE PROVISION OF LAW [ MALABAR INDUSTRIAL CO. LTD. - VS- CIT (2000) 243 ITR 83 (SC)]. THUS, AN ORDER CAN BE REV ISED ONLY AND ONLY IF TWIN CONDITIONS OF ' ERROR IN THE ORDER AND ' PREJUDICE CAUSED TO THE REVENUE ' CO-EXIST. IF ANY OF THESE PRE-CONDITIONS ARE ABSENT THE LD. CIT CANNOT SEEK RECOURSE TO THIS PROVISION. THE PROVISION OF S. 263( 1) OF THE ACT C ANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS, THAT THE PROVISION WILL BE ATTRACTED. IF THE ORDER IS PASSED WITH DUE APPLICATION OF MIND, SUCH ORDER WILL NOT FALL UNDER THE CATEGORY OF ERRONEOUS ORDER. HOWEVER, EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IF THE AO HAS ADOPTED ONE OF THE COURSE S PERMISSIBLE UNDER LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIE W WITH WHICH THE LD. CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORD ER UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE UNDER THE LAW. IN THE INSTANT CASE , THE AO HAS MADE ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVAN T ISSUE AND THE APPELLANT HAS GIVEN A DETAILED EXPLANATION ON THE ISSUE AND THE AO ACCE PTED SUCH STANCE OF THE APPELLANT BY CONSTRUING THE NET PROFIT ON SUCH UNDISCLOSED PU RCHASES AS THE UNDISCLOSED INCOME WHICH IS TUNE WITH THE SETTLED POSITION; SUCH DECIS ION CANNOT BE ERRONEOUS. IN THE ABOVE CIRCUMSTANCES, THE VIEW TAKEN BY THE AO WAS O NE OF THE POSSIBLE VIEWS WHICH IS IN TUNE WITH THE SETTLED POSITION IN LAW AND ACC ORDINGLY. THE ASSESSMENT ORDER PASSED BY HIM COULD NOT BE CONSIDERED TO BE ERRONEOUS IN S O FAR AS IT IS NOT PREJUDICIAL TO THE INTERESTS OF REVENUE AND THE ACTION OF THE COMMISSI ONER OF ASSUMING JURISDICTION U/S. 263 OF THE ACT AND DIRECTING THE AO TO ADD THE ENTI RE UNACCOUNTED PURCHASE U/S 69C OF THE ACT WITHOUT CONSIDERING THE FACTUAL MATRIX OF T HE INSTANT CASE IS WHOLLY CONTRARY TO THE STATUTORY POSITION IN THIS RESPECT. 6. ON THE OTHER HAND LD. DR STATED THAT WHILE THE L ESS AMOUNT OF PURCHASE HAS BEEN SHOWN IN ASSESSEES BOOKS OF ACCOUNT, IT MEANS CORRESPONDING AMOUNT OF SALE HAS NOT BEEN RECORDED IN ASSESSEES BOOKS OF ACCOUNT AL SO. THEREFORE, BOTH AMOUNT OF SALE AND PURCHASE WERE NOT DECLARED Y ASSESSEE IN HIS RE TURN OF INCOME AND AMOUNT SHOWN IN THE TAX AUDIT REPORT IS ALSO NOT RELIABLE. HE VE HEMENTLY RELIED ON THE ORDER OF LD. CIT. ITA NO.1188/KOL/2014 A.Y.2009-10 BISWABRTA MAITY V. CIT-XX, KOL PAGE 8 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION, WE FIND THAT ASSESSEE HAS FILED REVISED COMPUTATION OF INCOME ALONG WITH REVISED FINAL ACCO UNT AND AUDITOR REPORT WHICH ARE PLACED ON PAGE 56 OF THE PAPER BOOK. LD. AR FURTHER DREW OUR ATTENTION ON THE BANK STATEMENT WHICH IS PLACED ON PAGE 64 OF THE PAPER B OOK AND DEMONSTRATED THAT ALL THE PAYMENTS TO THE CREDITORS WERE ROUTED THROUGH BANKI NG CHANNEL AND THEREFORE IT CANNOT BE SAID THAT AMOUNT OF PURCHASE WITH CORRESPONDENCE SALE WERE SHOWN OUT OF THE ASSESSEES BOOKS OF ACCOUNT. WE HAVE VERIFIED THE B ANK STATEMENT AND FOUND THAT IN MOST OF THE CASES PAYMENTS FOR THE PURCHASES WERE M ADE THROUGH BANKING CHANNEL. IT IS ALSO NOT IN DISPUTE THAT THE RELEVANT BANK A/C H AS NOT BEEN SHOWN IN THE RETURN INCOME OF ASSESSEE. FROM THE FACTS OF THE CASE, WE FIND THAT IT IS NOT IN DOUBT THAT ERROR HAS BEEN COMMITTED BY ASSESSEE IN FILING ITS RETURN INCOME BUT WE HAVE TO SEE WHETHER IT IS PREJUDICIAL TO THE INTEREST OF REVENUE OR NOT . IN THE INSTANT CASE, ASSESSEE HAS ADMITTED ITS MISTAKE AND FILED ITS REVISED COMPUTAT ION OF INCOME ALONG WITH FINAL ACCOUNT AND AUDITED REPORT. HOWEVER, WE FIND THAT L D. CIT DIRECTED THE AO TO TREAT THE ENTIRE DIFFERENCE AMOUNT AS UNEXPLAINED INCOME U/S. 69C OF THE ACT AND AT THIS JUNCTURE, WE WOULD LIKE TO PRODUCE THE PROVISION OF SEC. 69C OF THE ACT, WHICH IS READS AS UNDER:- :[ 69C. UNEXPLAINED EXPENDITURE, ETC . WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURRE D ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SU CH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY, OFFERED B Y HIM IS NOT, IN THE OPINION OF THE [ASSESSING] OFFICER, SATISFACTORY, T HE AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF, AS THE CASE MAY B E, MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YE AR:] [PROVIDED THAT NOTWITHSTANDING ANYTHING CONTAINED I N ANY OTHER PROVISION OF THIS ACT, SUCH UNEXPLAINED EXPENDITURE WHICH IS DEEMED TO BE THE INCOME OF THEE ASSESSEE SHALL NOT BE ALLOWED AS A DEDUCTION UNDER ANY HEAD OF INCOME.] FROM THE PLAIN READING OF THE PROVISION, WE FIND TH AT THE PROVISIONS OF SECTION IS APPLIED IN A CASE WHERE ASSESSEE OFFERED NO EXPLANA TION ABOUT THE SOURCE OF SUCH EXPENDITURE. IN THE INSTANT CASE, ASSESSEE HAS EXPL AINED THE SOURCE OF EXPENDITURE INCURRED. WE ALSO RELIED IN SIMILAR FACTS AND CIRCU MSTANCES THE CO-ORDINATE BENCH HAS ITA NO.1188/KOL/2014 A.Y.2009-10 BISWABRTA MAITY V. CIT-XX, KOL PAGE 9 DECIDED THE ISSUE IN FAVOUR OF ASSESSEE IN ITA NO.1646/KOL/2009 FOR A.Y 2006-07 DATED 18.05.2010 WHERE THE BENCH HAS HELD:- 6. AFTER HEARING THE RIVAL SUBMISSIONS, CAREFULLY PERUSING THE MATERIAL AVAILABLE ON RECORD AND THE CASE LAWS CITED BY THE LD. COUNSEL FOR THE ASSESSEE, WE FIND THAT ON SIMILAR ISSUE AND ON IDENTICAL FACT S THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF THE VARIETY STORES VS. I TO IN ITA NO.2635/KOL/2005, AY 2002-03 DATED 26.5.2006 HAS HELD AS UNDER:- CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND CONSIDERING THE FACT THAT THE AO HAS ALREADY TAXED THE PROFIT ON SUCH UN DISCLOSED PURCHASES AND CONSIDERING THE FACT THAT THE REVENUE HAS NOT B ROUGHT ON RECORD THAT INVESTMENT REMAINED IN PURCHASES OR THE ADDITIONAL INVESTMENT IS REQUIRED OVER AND ABOVE THE CAPITAL EMPLOYED BY THE ASSESSEE FOR SUCH UNACCOUNTED PURCHASE THE ADDITION MAD BY THE AO AND SUSTAINED BY THE LD. CIT(A) IS NOT JUSTIFIED AND ACCORDINGLY THE SAM E IS DIRECTED TO BE DELETED. THE VIEW OF THE COORDINATE BENCH IS IN CONFORMITY W ITH THE RATIO LAID DOWN IN THE CASE LAWS RELIED ON BY THE LD COUNSEL FOR THE S E, THEREFORE, THE ADDITION MADE BY THE AO AND SUSTAINED BY LD. CIT(A) AMOUNTIN G TO RS.2,71,050/- IS HEREBY DELETED. SIMILARLY, WE ARE ALSO PUTTING OUR RELIANCE IN THE JUDGMENT OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. S.M. OMER (1992) 10 7 CTR 0272 : (1993) 201 ITR 0608 : (1992) 62 TAXMAN 0046. THE RELEVANT EXTRACT OF THE JUDGMENT IS REPRODUCED BELOW. BOTH THE CIT(A) AND THE TRIBUNAL HELD THAT THE ENT IRE AMOUNT INVESTED FOR THE RAW MATERIALS COULD NOT BE ADDED AS INCOME INASMUCH AS FOR THE PURPOSE OF EARNING THIS INCOME THE ASSESSEE HAD MADE CERTAIN E XPENDITURE. SEC. 69 HAS NO MANNER OF APPLICATION IN FACTS AND CIRCUMSTANCES OF THE CASE. SEC. 69 HAS APPLICATION IN THE CASE OF UNEXPLAINED INVESTMENTS MADE BY THE ASSESSEE WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT. THE ASSES SEE SUPPLIED THE GOODS AFTER INCURRING CERTAIN COST AND AFTER MANUFACTURING OF T HE GOODS AND THE AMOUNT THAT WAS RECEIVED FROM THE PROFIT AND EXPENDITURE. IN THIS REFERENCE THE FINDING MADE BY THE TRIBUNAL HAS NOT BEEN CHALLENGED AND NO QUESTION OF PERVERSITY HAS BEEN RAISED AND AS SUCH THE FINDINGS MADE BY TH E TRIBUNAL IN THIS BEHALF COULD NOT BE INTERFERED WITH BY THE HIGH COURT IN R EFERENCE. ACCORDINGLY, THE TRIBUNAL IS JUSTIFIED IN UPHOLDING THE DELETION OF ADDITION OF CONSTITUTING THE UNEXPLAINED COST OF MATERIAL AND MANUFACTURING COST OF GOODS SUPPLIED BY THE ASSESSEE. ADDITION REPRESENTING COST OF RAW MATERIALS AND MAN UFACTURING COST OF GOODS SUPPLIED BY ASSESSEE COULD NOT BE SUSTAINED UNDER S . 69 INASMUCH AS GOODS ITA NO.1188/KOL/2014 A.Y.2009-10 BISWABRTA MAITY V. CIT-XX, KOL PAGE 10 WERE SUPPLIED EVIDENTLY AFTER INCURRING CERTAIN COS T AND RECEIPTS INCLUDED AN ELEMENT OF EXPENDITURE. SIMILARLY, WE ARE ALSO PUTTING OUR RELIANCE IN THE ORDER OF ITAT, JAIPUR BENCH IN THE CASE OF JAI KUMAR JAIN VS. ACIT (2005) 24 CCH 0 639 JAIPURTRIB (2006) 99 TTJ 0744 WHERE IT HELD AS UNDER: ADDITION OF RS. 2,75,000 HAS BEEN MADE BY THE AO N OT ON THE BASIS OF CASH FOUND AT THE TIME OF SEARCH BUT ON THE BASIS OF TH E STATEMENT OF V, SON OF THE ASSESSEE. IN THE STATEMENT IN REPLY TO QUESTION NO. 6 ABOUT THE DIFFERENCE IN CASH AS PER CASH BOOK AT RS. 1,26,234 AND THAT PHYS ICALLY FOUND AT RS. 5,605, HE EXPLAINED THAT THIS DIFFERENCE IS FOR THE REASON THAT S HAS GONE TO GUJARAT FOR PURCHASE OF MATERIAL PREVIOUS EVENING WITH APPROXIM ATELY RS. 2.75 LAKHS. V HAS NOWHERE STATED THAT RS. 2,75,000 WAS GIVEN TO H IM ONLY ON THAT DAY. AN AMOUNT OF RS. 1,84,946 WAS LYING IN THE 'DISAWAR AC COUNT IN THE REGULAR BOOKS OF ACCOUNT. THUS, IN ALL THE ASSESSEE-FIRM HAS AVAI LABILITY OF RS. 3,11,180 (1,84,946 + 1,26,234) IN THE BOOKS WHEREAS CASH WAS FOUND AT BUSINESS PREMISES AT RS. 5,605 ONLY. THUS THE BALANCE OF RS. 3,05,775 IS ENOUGH TO EXPLAIN THE AMOUNT OF RS. 2,75,000 GIVEN TO S AS PE R THE STATEMENT OF V. THE CIT(A) IS, THEREFORE, RIGHT IN DELETING THIS ADDITI ON. THE AMOUNT OF RS. 26,910 IS COVERED BY THE AMOUNT AVAILABLE AS PER CASH FLOW ST ATEMENT OF FAMILY MEMBERS AS PER WHICH CASH IN HAND IS RS. 2,06,305 AS AGAINS T RS. 1,83,210 FOUND. THIS TAKES CARE OF HOUSEHOLD WITHDRAWALS ALSO. SIMILARLY THE AMOUNT OF RS. 16,660 WHICH IS FOUND FROM THE ROOM OF CHILDREN AS PER THE PANCHNAMA IS COVERED BY THEIR PETTY SAVINGS. THUS THE ADDITION MADE ON ACCO UNT OF UNEXPLAINED CASH IS UNJUSTIFIED AND THE ENTIRE ADDITION IS DELETED. CASH BALANCE AS PER CASH BOOK WHICH WAS FOUND SHORT TOGETHER WITH THE BALANCE IN THE 'DISAWAR A/C IN THE REGULAR BOOKS O F ACCOUNT BEING ADEQUATE TO EXPLAIN THE AMOUNT LYING WITH EMPLOYEE FOR AS ADVAN CE FOR PURCHASE OF MATERIAL, SAME COULD NOT BE TREATED AS UNEXPLAINED MONEY. 8. WE ALSO FIND THAT ON SIMILAR FACTS AND IN CONFOR MITY WITH THE RATIO LAID DOWN IN THE CASE OF SEEMA CHATTERJEE V. ITO IN ITA NO.2174/KOL/2010 IN AY 05-06 DATED 17.07.2014, WHERE THE TRIBUNAL HAS HELD AS UNDER:- 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET, LD. COUNS EL FOR THE ASSESSEE STEED THAT EVEN THOUGH THE PURCHASES ARE BOGUS THE ENTIRE PURC HASES CANNOT BE ADDED BECAUSE CORRESPONDING SALES IS ALSO THERE. HE ACCOR DINGLY AGREED THAT A NET PROFIT RTE CAN BE APPLIED. ON QUERY FROM THE BENCH, THE LD. SR.DR ALSO STATED THAT A REASONABLE RATE CAN BE APPLIED THAT WILL SUF FICE THE MATTER. WE FIND THAT THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE IS REA SONABLE THAT THE ENTIRE PURCHASES CANNOT BE ADDED BECAUSE CORRESPONDING SAL E IS ALSO THERE. ITA NO.1188/KOL/2014 A.Y.2009-10 BISWABRTA MAITY V. CIT-XX, KOL PAGE 11 ACCORDINGLY, WE DIRECT THE AO TO COMPUTE THE NET PR OFIT @ 10% ON THESE BOGUS PURCHASE. WE DIRECT ACCORDINGLY. THIS ISSUE OF ASSE SSEES APPEAL IS PARTLY ALLOWED. CONSIDERING THE FACTS IN TOTALITY THAT THE AO HAS A LREADY TAXED THE PROFIT ON UNDISCLOSED PURCHASE AND LD. DR HAS NOT BROUGHT ON RECORD WITH REGARD TO THE INVESTMENT MADE IN PURCHASES OVER AND ABOVE THE CAP ITAL EMPLOYED BY ASSESSEE FOR SUCH UNACCOUNTED PURCHASE. THEREFORE THE ORDER OF A O CANNOT BE SAID AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE, WE QUASH THE ORDER PASSED U/S 263 OF THE ACT BY LD. CIT AS UNSUSTAINABLE IN LAW. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 10/08/2016 SD/- S D/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP ! - 10/08/2016 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-BISWABRTA MAITY, 100/60, G.T. ROAD, RISH RA, DIST. HOOGHLY 2. /RESPONDENT-CIT, KOLKATA-XX, 54/1, RAFI AHMED KIDWA I RD. 1 ST FL, KOL-16 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ , /TRUE COPY/ / '# ,